Money Transmitters
Money Transmitter License: Steps + Requirements (2025)
Nov 27, 2024
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InnReg
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17 min read
Contents
A money transmitter license is a legal necessity for any business that transfers funds, processes payments, or deals with digital currencies.
And with financial regulations becoming stricter, obtaining a license is key to staying compliant with both state and federal laws.
In this guide, we’ll cover some important steps and requirements for obtaining a money transmitter license in 2025, helping your business operate legally and efficiently in the financial landscape.
See also:
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013. If you need assistance with compliance or fintech regulations, click here.
What Is a Money Transmitter License?
A money transmitter license is a regulatory authorization required for businesses that transmit money or handle financial transactions on behalf of others.
This license is designed to regulate financial activities that involve moving funds from one party to another, ensuring that businesses operating in this space adhere to anti-money laundering (AML) and know your customer (KYC) laws.
In the US, obtaining a money transmitter license is typically governed at the state level, although federal registration with the Financial Crimes Enforcement Network (FinCEN) is also mandatory.
You should also note that each state has its own rules and regulations, so businesses operating across multiple states should apply for licenses in each state where they do business.
Why Do You Need a Money Transmitter License?
A money transmitter license is more than just a legal requirement—it plays a critical role in protecting your business and customers.
Here's why your company needs one:
1. Legal Compliance: This license protects your company from significant fines, legal actions, and potential shutdowns that come with operating without one.
2. Access to Banking and Payment Networks: In certain cases financial institutions, banks, and payment processors require a money transmitter license before entering into partnerships. Securing this license positions your business to collaborate with key industry players and expand your service offerings.
3. Compliance with Anti-Money Laundering Laws: With increasing scrutiny on financial services, a money transmitter license helps ensure your business complies with AML laws, reducing exposure to risks related to fraud, money laundering, or terrorist financing.
4. Building Trust with Customers and Partners: Having a money transmitter license shows that your business operates within the legal framework and follows stringent financial regulations. This helps build trust with customers, partners, and investors.
5. Enabling Scalability and Market Expansion: Obtaining a license opens the door to expanding into new markets domestically and internationally. Therefore, with a money transmitter license, you can scale your services, positioning your business for growth and increased market share.
Who Needs a Money Transmitter License?
A money transmitter license is required for businesses that handle the transfer of funds or facilitate financial transactions on behalf of others.
This includes a broad range of financial service providers, both traditional and digital, that process or move money, and may include companies involved in:
Electronic money transmitting
Foreign currency dealing or exchanging
Money orders
Bill paying
Cryptocurrencies and digital asset exchanges
Here are the types of businesses that typically need a money transmitter license:
1. Remittance Services
Businesses that offer remittance services, helping individuals send money across state or international borders, must have a money transmitter license. Companies like Western Union and MoneyGram are prime examples of this category.
2. Cryptocurrency Exchanges and Wallet Services
With the rise of digital currencies, cryptocurrency exchanges and wallet providers are required to obtain a money transmitter license. These platforms allow users to buy, sell, or store digital assets, effectively transferring value between parties.
3. Mobile Payment Apps
Apps like Venmo, Cash App, and Zelle, which allow users to send money to friends or family or make payments, also require a money transmitter license to operate legally. Since they process financial transactions and act as intermediaries, they fall under the definition of money transmitters.
4. Bill Payment Services
If your business accepts customer payments to forward them to utility companies, lenders, or other service providers, you’re likely considered a money transmitter and will need a money transmitter license.
5. Currency Exchange Businesses
Businesses that facilitate the exchange of one currency for another—whether traditional or digital—must secure a money transmitter license. This ensures the company complies with AML/KYC regulations and other financial safeguards.
6. Prepaid Card Issuers
Companies that issue and reload prepaid cards also need a money transmitter license. These cards are often used as an alternative to traditional bank accounts and involve transferring money between users and merchants.
7. Marketplace Facilitators
Marketplaces like eBay and Amazon, which process payments between buyers and sellers, might also require a money transmitter license if they hold funds temporarily before transferring them to the seller, which qualifies as money transmission.
8. Payroll Service Providers
Businesses that handle payroll processing and deposit wages into employees’ accounts on behalf of employers may also need a money transmitter license. Since they manage the transfer of funds between different parties, they fall into the regulated category.
Exemptions and Special Cases
While many businesses that handle financial transactions require a money transmitter license, there are notable exemptions and special cases where licensing may not be necessary.
Here are some common exemptions and special circumstances that may apply:
1. Banks and Credit Unions
Banks, credit unions, and other federally or state-chartered financial institutions are typically exempt from obtaining a money transmitter license.
Since these institutions are already heavily regulated and subject to stringent financial oversight by regulatory bodies such as the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA), they do not require additional licensing to engage in money transmission activities.
2. Agents of the Payee
This exemption applies when a business collects payments on behalf of a payee (e.g., merchants or service providers), and the obligation is considered fulfilled once the agent receives the payment.
In these cases, the payment agent is not viewed as transmitting money but rather as completing the transaction directly with the payee. For example, platforms that collect payments on behalf of utility companies or online merchants may fall under this exemption.
3. Merchant Payment Processors
Some payment processors that directly facilitate payments between customers and merchants may be exempt from obtaining a money transmitter license.
In these instances, the processor's role is limited to moving money directly between the buyer and the merchant without holding or controlling the funds for an extended period. This exemption often applies to credit card processors and point-of-sale (POS) systems, though state laws vary on the specifics.
4. Government Entities
Government agencies and entities that provide financial services, such as tax collection, public benefit programs, or other official services, are exempt from money transmitter licensing requirements.
Since they operate within their own regulatory frameworks, government bodies are not required to hold separate licenses.
5. Payroll Processing Services
In some states, payroll processing services that disburse wages on behalf of employers may be exempt from licensing. These businesses are viewed as fulfilling an employer's obligation to pay employees rather than engaging in money transmission.
However, this exemption does not always apply, and businesses should check individual state laws to ensure compliance.
6. Securities and Commodities Brokers
Brokerage firms registered and regulated under securities or commodities laws may be exempt from money transmitter licensing when handling the transfer of securities, bonds, or commodities.
Since they operate under existing financial regulations (e.g., the SEC or FINRA), they are not required to obtain a separate money transmitter license for these specific activities.
You should, however, note that the rules vary by state, and exemptions must be carefully evaluated on a case-by-case basis.
Money Transmitter License Requirements in 2025
When applying for a money transmitter license, businesses must navigate both state and federal regulatory frameworks. State regulations require careful attention, as they have varying requirements that must be met to ensure compliance.
Here’s how these two levels differ:
State MSB License Requirements
In addition to federal regulations, each US jurisdiction has its own requirements for money transmitter licensing. State regulations vary and include individual state applications, surety bonds, background checks, and state-specific financial requirements, among others.
Federal MSB Requirements
At the federal level, money transmitters are considered Money Services Businesses (MSBs) and must comply with regulations set by FinCEN.
These requirements include MSB registration, AML compliance, KYC protocols, recordkeeping, and reporting.
Key Documentation for Money Transmitter License Application
Applying for a money transmitter license involves gathering and submitting several important documents to meet state requirements. Below is a list of key documentation typically required for the application process:
1. MSB Registration Documentation: As part of state compliance, businesses must submit proof of registration with FinCEN. This document shows that the business has completed its registration as a Money Services Business.
2. AML/KYC Compliance Program: An Anti-Money Laundering Compliance Program includes procedures for monitoring and reporting suspicious activity, customer identity verification protocols, and transaction tracking systems to detect fraud or money laundering.
3. Surety Bond: Most states require a surety bond, and businesses must provide documentation of the bond amount, which varies based on the state’s rules. The bond acts as a financial guarantee that the business will fulfill its legal obligations.
4. Business Plan: A comprehensive business plan is critical to the application. It must detail the company’s financial model, target markets, and customer base, as well as operational processes, including how the business will comply with regulatory requirements.
5. Financial Statements: States want assurance of a company’s financial health, so most applications require the submission of financial statements, balance sheets, income statements, and proof of adequate capital reserves and liquidity to manage day-to-day operations.
6. Ownership and Management Information: This includes detailed information about the business’s ownership structure, such as the identities and backgrounds of all executives, shareholders, and key personnel.
7. State-Specific Forms and Fees: Each state has its own forms and fees which must be completed and paid as part of the application process. For businesses operating in multiple states, this can result in managing a significant volume of documentation.
8. Operational and Compliance Procedures: States may ask for descriptions of operations and compliance strategies, including how the business handles consumer protection measures, internal audits, financial controls, and procedures for safeguarding customer funds.
Financial Stability and Surety Bond Requirements
Financial stability is a critical part of qualifying for a money transmitter license. Here are the key factors involved:
1. Minimum Net Worth Requirements
Many states require applicants to have a certain minimum net worth to qualify for a license to ensure the business has enough financial backing to cover potential liabilities. The required net worth can range from $10,000 to several million dollars, depending on the state and the business size. Common minimum net worth requirements range from $100,000 to $500,000.
2. Liquidity and Capital Reserves
Businesses must demonstrate they have enough liquidity to handle operational needs. States often require proof of capital reserves or liquid assets to ensure the business can continue operating even during challenging financial periods.
3. Surety Bond Requirements
A surety bond serves as a form of insurance to protect the state and customers if the business fails to meet its obligations. Bond amounts vary widely by state but can range from $10,000 to $500,000 or more. Factors that can influence the bond amount include:
The volume of transactions processed by the business.
The financial health and stability of the business.
The risk profile of the money transmission activities.
Some states may require a higher bond amount for businesses dealing in cryptocurrencies or those with higher transaction volumes.
4. Annual Audits and Financial Reporting
To maintain a money transmitter license, many states require regular audits and financial reporting. Businesses must file annual financial statements, proving that they are still financially sound and can meet their obligations. In most cases, these statements must be audited by a third-party accounting firm.
See also:
Steps to Apply for a Money Transmitter License
Applying for a money transmitter license can be a complex process due to the various requirements. Below is a step-by-step guide that breaks down each phase to help your business navigate the process more efficiently.
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Step 1: Register with FinCEN as an MSB
The first step in obtaining a money transmitter license is to register with FinCEN as an MSB. This registration is mandatory to ensure your business complies with federal AML regulations.
Here’s what you need to do:
Complete the FinCEN Form 107: This is the registration form for MSBs and must be submitted electronically through the FinCEN website.
Submit Basic Business Information: You will need to provide details such as your business name, address, services provided, and the names of key personnel.
Renew Registration Every Two Years: MSB registration with FinCEN must be renewed every two years, and failure to renew can result in penalties or legal sanctions.
Once registered, FinCEN will monitor your business for compliance with federal laws, including transaction reporting, designating a compliance officer, and ongoing employee training, among others.
Step 2: Submit State Money Transmitter License Application(s)
Since money transmission is regulated at the state level, you must apply for a license in each state where you plan to operate.
Research State Requirements: Each state has its own rules, application process, and fees. Some states allow you to use the Nationwide Multistate Licensing System (NMLS) to streamline your applications, while Florida, New Jersey, and the Virgin Islands require direct applications.
Prepare Required Documents: These typically include your business plan, financial statements, AML/KYC compliance documentation, key personnel information, business information, certificates of good standing, and proof of surety bonds. Each state may have different documentation requirements, so prepare your applications accordingly.
Pay Application Fees: State application fees vary but can range from a few hundred dollars to several thousand per state. Make sure to budget for these fees, especially if you plan to apply for licenses in multiple states.
Expect Processing Time: Depending on the state, the application review process can take a few weeks to several months. Some states may conduct additional audits or request more information before granting a license.
Step 3: Provide Background Checks and Compliance Plans
Most states require checks for owners, directors, and key executives, reviewing criminal and financial histories, and fingerprinting.
A solid compliance plan is also essential, outlining how your business will follow state and federal regulations. It should include transaction monitoring systems, record-keeping procedures, and customer due diligence processes to ensure regulatory compliance.
Additionally, many states require training programs for employees to stay informed about compliance rules. These programs help ensure your business consistently meets legal standards and avoids penalties.
Step 4: Obtain Surety Bonds and Proof of Financial Stability
You'll also need to provide proof of financial stability and obtain the necessary surety bonds, both of which are critical for showing that your business can operate responsibly and meet its obligations.
Each state requires Surety Bonds as a financial guarantee that your business will fulfill its legal duties. The bond amount typically ranges from $10,000 to $500,000, depending on your business's transaction volume and financial health.
Companies with higher transaction volumes or those in high-risk sectors, such as cryptocurrency, may need a larger bond. Surety bonds also protect consumers and the state from financial losses if your business fails to comply with regulations.
Most states impose minimum net worth requirements and may also ask for liquidity reserves to ensure your business can cover operational costs. These steps help demonstrate that your company is financially capable of managing its obligations.
Step 5: Comply with AML/KYC Regulations
Once your business is registered and licensed, maintaining compliance with AML and KYC regulations is essential to prevent illegal activities like money laundering or terrorist financing.
For your AML program, you must develop and maintain processes that meet federal and state standards. This includes implementing transaction monitoring systems to detect suspicious activities, such as unusually large or frequent transfers.
If any suspicious transactions are found, you are required to submit Suspicious Activity Reports (SARs) to FinCEN. Additionally, employee training is essential to ensure your staff can identify and report suspicious behavior.
KYC requirements, on the other hand, focus on verifying your customers' identities. This process involves collecting customer details like name, address, and date of birth and verifying their identity using official documents like a passport or driver's license.
Reporting Obligations for MSBs
Money Services Businesses, including money transmitters, have strict reporting requirements to help authorities monitor financial activities and prevent illegal transactions. Ongoing reporting obligations include:
1. MSB Call Reports
Money Services Businesses, including money transmitters, must submit quarterly MSB Call Reports to provide regulators with insights into their activities.
These reports cover essential data, including transaction volumes by service type, geographic information to pinpoint transaction locations, and compliance measures like anti-money laundering efforts.
Most MSBs submit their reports through the Nationwide Multistate Licensing System (NMLS) to streamline compliance across participating states, though state-specific requirements may still apply.
2. Suspicious Activity Reports (SARs)
MSBs are required to file SARs with FinCEN whenever they identify transactions that may involve money laundering, fraud, or terrorist financing.
Key triggers for filing SARs include unusual transaction patterns, such as large or structured transfers meant to avoid reporting thresholds, and customer behavior inconsistent with their typical financial profile.
Additionally, international transactions involving countries with high levels of financial crime or weak AML safeguards also warrant close scrutiny.
SARs must be submitted within 30 days of detecting the suspicious activity, and MSBs are required to keep these records for at least five years to ensure they are available for future audits or investigations.
3. Currency Transaction Reports (CTRs)
Businesses must file Currency Transaction Reports (CTRs) for cash transactions exceeding $10,000 in a single day. This requirement applies to deposits, withdrawals, currency exchanges, or other cash movements.
Like SARs, CTRs are submitted to FinCEN and are critical for tracking large transactions that could be tied to money laundering or illegal activities.
4. Recordkeeping Requirements
As part of ongoing compliance, MSBs must maintain detailed records of transactions, customer information, and financial activities.
These records are vital for demonstrating compliance during state or federal audits, which may occur periodically to ensure the business follows regulatory guidelines.
Additionally, maintaining thorough transaction records allows the business to verify the legitimacy of any transaction if questions or disputes arise later.
The retention period for transaction records is typically five years, though some states may have additional or longer requirements.
See also:
Renewing Your Money Transmitter License
Obtaining a money transmitter license is not a one-time process—licenses must be renewed on an annual basis.
The renewal process varies by state, but in general, updated information should be provided to the licensing authority to prove ongoing compliance. Key steps include:
1. Submit Updated Financial Information: You will need to provide up-to-date financial statements, such as balance sheets, income statements, and proof of liquidity (e.g., bank statements or capital reserves).
2. Renew Surety Bonds: Most states require that you maintain your surety bond throughout the life of your business. You may need to adjust the bond amount or provide a bond rider as part of the renewal process.
3. Pay Renewal Fees: Each state has its own renewal fee. These fees must be paid on time to avoid delays in the renewal process, which could risk your business operating without a valid license.
4. Update Business Information: You’ll also be required to update the state with any changes to your business, such as new ownership or management and changes in business structure or operations, among others.
Money Transmitter License Cost Breakdown
Here is a comprehensive breakdown of the key costs of securing and maintaining a money transmitter license.
1. State Application Fees
State application fees range from $500 to over $5,000 per state, depending on the jurisdiction.
Most states also require annual or biennial license renewal, and these renewal fees can range from $250 to $5,000, depending on the state and your business size.
Examples:
California: Initial application fee is $5,000, with a $2,500 annual renewal fee.
Texas: Initial application fee is $2,500, and the renewal fee depends on the business's annual transaction volume.
New York: The application fee is $3,000, with an annual renewal cost of $500 to $1,000.
2. Surety Bond Costs
Surety bond requirements range from $10,000 to as much as $1 million, depending on the state and the perceived risk of your business. States typically base bond requirements on the company’s financial history and transaction volume.
You may also incur a bond premium, and the cost for one typically ranges from 1% to 5% of the total bond amount.
For example, if you’re required to post a $100,000 bond, the annual premium could be between $1,000 and $5,000, depending on your creditworthiness and business finances.
Examples:
Florida: Requires a bond between $50,000 and $2 million, depending on business volume.
Washington: Requires a $10,000 to $550,000 bond, depending on transaction amounts.
Illinois: Bond requirements start at $100,000.
3. Legal and Consulting Fees
Navigating the money transmitter license application process can be complex, especially when applying in multiple states. This is why many businesses hire attorneys or consultants like InnReg with expertise in financial regulation to help with their application process.
The cost of hiring legal counsel can range from $10,000 to $50,000 or more, depending on the complexity of the application process, the number of states involved, and the attorney’s experience level.
If you hire a consulting firm specializing in money transmitter licensing, fees can range from $5,000 to $20,000 per state, depending on the scope of services provided. Consulting firms also often assist with preparing applications, drafting compliance policies, and securing surety bonds.
4. Background Check and Fingerprinting Fees
Depending on the state, background checks can range from $50 to $200 per person. Some states may also require fingerprinting, which can add an additional fee.
If you are applying for licenses in multiple states, you may need to complete background checks in each state, leading to additional costs.
5. Financial Audits and Reporting Costs
Annual audit fees can range from $5,000 to $20,000, depending on the size and complexity of your business. These fees may increase if you operate in multiple states and need to submit audits to multiple regulators.
Money transmitters must also submit regular reports to state and federal authorities. While the direct cost of submitting these reports is typically low, the operational costs of maintaining compliance systems and staff can add up.
6. Technology and Compliance Costs
Regulatory compliance software costs can range from $10,000 to $100,000 per year, depending on the size of your business and the features required.
Ongoing employee training on compliance requirements, AML/KYC procedures, and regulatory changes is also necessary. Many businesses hire dedicated compliance officers, which can increase staffing costs.
Salaries for compliance officers typically range from $70,000 to $200,000 per year.
7. Miscellaneous Costs
Travel costs can arise if a state requires in-person meetings, interviews, or inspections. You may also incur notary and certification fees for documents that must be notarized or certified, adding small but necessary costs to the process.
Additionally, some states may require specific types of insurance, such as errors and omissions (E&O) insurance, to protect your business against operational risks beyond the coverage provided by surety bonds.
These extra costs should be factored into your overall budget for the licensing process.
Total Estimated Cost for a Money Transmitter License
The total cost of obtaining and maintaining a money transmitter license will vary widely depending on your operational footprint, the number of licenses, and the volume of transactions you handle.
For a business applying in multiple states, these costs could start at $1 million when factoring in application fees, surety bonds, legal services, and ongoing compliance costs.
FAQs about Money Transmitter Licenses
Can I apply for multiple licenses at the same time?
Yes, you can apply for multiple licenses simultaneously, especially if your business offers a variety of financial services. For example, if you provide both money transmission and currency exchange services, you may need to apply for separate licenses covering each activity. Additionally, if you plan to operate in multiple states, you can submit applications in different states concurrently, although the requirements and approval timelines may vary from state to state.
Do cryptocurrency businesses need a money transmitter license?
Yes, many cryptocurrency businesses, such as exchanges and wallet providers, are typically required to obtain a money transmitter license. Since cryptocurrencies are considered a form of value transfer, regulators often treat them similarly to traditional currencies under money transmission laws. State regulations vary, and some states have specific requirements for crypto businesses, so reviewing the rules in each state where you plan to operate is essential.
What is the difference between a Money Transmitter License and other MSB licenses?
A Money Transmitter License is required for businesses that transfer money between parties, including remittance service providers and cryptocurrency exchanges. It covers both traditional currencies and digital assets. Other licenses focus on lending, mortgage servicing, sales financing, collections, etc. While all MSBs must follow AML and KYC regulations, MTLs typically face stricter requirements due to the higher risk of fund transfers, often requiring larger surety bonds and proof of liquidity.
The process of obtaining a money transmitter license can be complex, with varying requirements at the state level. However, securing this license is essential for legal compliance, building trust with customers, and expanding your business in the financial services industry.
At InnReg, we specialize in helping businesses streamline their licensing process, helping you meet regulatory requirements while staying focused on growth. Contact us today to learn how we can support your compliance journey and help your business succeed.
How Can InnReg Help?
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013.
We are especially effective at launching and scaling fintechs with innovative compliance strategies and delivering cost-effective managed services, assisted by proprietary regtech solutions.
If you need help with money transmitter compliance, reach out to our regulatory experts today:
Published on Nov 27, 2024
Last updated on Nov 27, 2024
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